China's Monetary And Fiscal Policies Affect Capital Structure On Manufacturing

Capital structure theory is an important part of financial theory, which involves not only corporate financial goals, capital acquiring methods, financing costs, the cash flow and other significant financial issues for enterprises. More importantly, the corporate capital structure has significant impact on the incentive structure. It has been discovered that the macroeconomic environment factors, such as monetary and fiscal policy, not only have a significant impact on capital structure, but also affect the capital structure adjustment speed. Manufacturing industry is the key industries which can promote the development of our national economy and enhance our international competitiveness. It is in favor of the smoothly coordinated development for entire industries to adjust the capital structure, and also, can coordinate and optimize the layout of the industry value chain. Furthermore, it has a significant meaning to enhance the development and competitiveness.The research of capital structure began from the research of the hypothesis of capital structure from the early the 1950s. And then, the birth of MM Theorem, and the debate lasting for a long time, showed that the research has been making progress deeply. Meanwhile, the capital structure empirical studies have advanced; scholars demonstrate the impact from all aspects.This paper chooses 214 listed companies from Shanghai and Shenzhen stock exchanges and regards corresponding balanced panel datasets as sample. The article analyses the impact of macroeconomic conditions on capital structure adjustment speed based on dynamic panel data with first-differenced GMM estimation. Two main conclusions are ultimately obtained:Firstly, firms adjust their capital structure toward target faster in good macroeconomic states relative to bad states. Secondly, the evidence holds whether or not firms are subject to financial constraints.The innovation of this paper is that the study, using the applied Dynamic Panel Data Model, discusses the impact of the macroeconomic environment on the company's capital structure adjustment speed from the dynamic point of view. While, the introduction of GMM estimates effectively overcome the endogenous regresses and the individual cross-section heterogeneity among the findings of the interference. In addition, the robustness of this empirical tests to ensure reliability of the conclusions. Meanwhile, the paper also noted that the fiscal and monetary policy on small and medium manufacturing companies in Chinese capital structure. Deeply thinking, the fiscal and monetary policy coordination should tilt to the small and medium-sized enterprises.There are some weaknesses in the research. It is hard to group the example based on the macroeconomic environment changes in a longer period of time, for the lack of available timing data. For fiscal and monetary policy judgment, we have not comprehensively considered the whole of fiscal and monetary policy, just using the fiscal and monetary policies affecting the macroeconomic indicators. About financing constraints, due to the lack of appropriate data, this article uses the company scale to measure the financing constraints and the conclusions are may restricted by it. Finally, for the strictly hypothetical, it limits the concrete analysis to the Chinese small and medium-sized enterprise's capital structure and financing constraints in the actual situation.